Next Game

Fact or Fiction, Myth or Truth (Part 1) - 11th February 2019

There are many claims made that are said to be the truth of CCFC’s situation in this mess. Such claims often lead to confusion and division. Below are some of the facts. The hope is that a clear statement of provable facts will help get everyone on the same page and we can face the problems that confront our Club in a unified manner.

None of what follows is opinion – just factual. As far as has been possible all entries are capable of independent third party verification and the sources of that verification can be disclosed. Please contact the Sky Blue Trust with details of any errors or amendments. The Sky Blue Trust will not be held liable for any action by a user of this information.

Abbreviations

OEG/CCFC – Otium Entertainment Group Ltd trading as “Coventry City Football Club”

SISU – SISU Capital Limited

ARVO – ARVO Master Fund

SBS&L – Sky Blue Sports & Leisure

CCC – Coventry City Council

AEHC – Alan Edward Higgs Charity

Wasps – Wasps Holdings Limited

Structure & Ownership….

“CCFC is the same as or is SISU” – INCORRECT

OEG was formed & registered in April 2011. It purchased the assets of “CCFC” and became OEG/CCFC in June 2013

Legally OEG/CCFC is a separate legal entity from ARVO, SBS&L or SISU.That is very important to understand because it protects SISU from OEG/CCFC creditors or actions taken against OEG/CCFC. It is why it has been so very difficult for anyone to take direct action against SISU.

SISU is declared at Companies House as a relevant legal entity that has the right to exercise significant influence or control over OEG.SISU is not declared as the owner of OEG/CCFC or being the same entity. SISU controls OEG/CCFC

The legal separation allows SISU to take actions concerning OEG/CCFC without it affecting the rest of the SISU business or funds. It allowed the creative & legal accumulation of losses. That is important to understand.

OEG is owned by ARVO and SBS&L. Both are controlled by other SISU entities and ultimately by Joy Seppala & Dermot Coleman (the shareholders/Directors of SISU Capital Limited)

SISU were appointed to manage the investments by their clients, for which they receive payment from the investment funds. The investment in OEG/CCFC is part of those funds

Tim Fisher is the only director of OEG/CCFC and joint director of SBS&L along with a SISU employee Laura Deering

OEG/CCFC is the only football trading entity in the group set up. SBS&L has no income

OEG employs all players, managers & staff and operates all functions of CCFC.

All turnover, income, player sales etc belong to OEG. All expenses & overheads paid by OEG

The EFL membership or “Golden share” is disclosed at Companies House in the name of OEG

CCFC cannot sign contracts, agreements or legal actions, only the directors of OEG can

It is the directors of OEG that have authority or power to make decisions, there are no directors of an entity called CCFC registered

All employees are not involved in all decisions, that does not mean CCFC is not fully involved in all decisions taken by OEG or decisions taken on behalf of OEG.

CCFC and OEG are one and the same

Court Action

“CCFC is not involved in the court action” – INCORRECT

The parties involved in the current Judicial Review are named on the court papers as ARVO SBS&L and OEG who are bringing action against Coventry City Council, with Wasps Holdings Ltd and Alan Edward Higgs Charity as interested parties.

OEG is the legal entity of CCFC – the club is involved and named in making a legal challenge whether it does any work on the case or not.

Not all employees of a business are part of or influence all decisions or even need to be. Employees or officers of OEG/CCFC do not need to attend court or be active in the case for the action to proceed and for OEG/CCFC to be involved

The action is instigated at the instruction of SISU that doesn’t alter the parties named on the court papers. It is OEG that is recognised by the Court. SISU are not named in bringing the action.

Directors are usually required to sign documents on behalf of a limited company. OEG has one director

Finances

“the only income CCFC receives is match day income” - INCORRECT

The 2017 group accounts show match receipts as £2.46m and commercial activity £3.67m plus the profit on player trading. Such analysis is available each year in the filed financial statements and is provided by the company and its director(s)

Commercial income is described by the directors as TV, Sponsorship, advertising, Club lottery, Shop and other promotion activities.

OEG/CCFC has received, prize money and various annual distributions from FA & EFL that will be included in the income figures

OEG/CCFC now stages fan’s events at the stadium

OEG/CCFC used to receive a share of food & beverage income on match days at the stadium, unknown if it still does. This amounted to 50:50 split of the net profit on such sales (or 15% of such turnover)

OEG/CCFC receives income from the club shop and online sales

OEG/CCFC receives the income from player trading and receives the Academy grants

OEG/CCFC does not receive any stadium sponsorship income but it does receive pitch side advertising and other sponsorship income

OEG/CCFC does not receive any income from other events at the stadium but nor does it pay any of those associated costs or take any of the financial risk.

“SISU have invested £70m even £100m since they have been here” – INCORRECT

An analysis of the statutory accounts cash flow statements discloses the amounts of loans physically received from SISU entities since 2008. It totals £33.15m up until 31 May 2017. (last published accounts).

However, the amount that is outstanding by the current club (ie OEG/CCFC) is £14.57m as at 31/05/2017 including interest accrued £5.63m. That sum is owed to ARVO & SISU Master Fund. The balance of the real debt £24.21m excluding interest relates to SBS&L pre-administration, is unsecured and is not a liability of OEG/CCFC.

Many of the losses have been retained from previous ownerships or created by clever accounting between group companies. All perfectly legal. But it is not hard cash spent.

SISU take the player sales income” – INCORRECT

No evidence to support this claim. The player sales are detailed in the accounts of OEG/CCFC. The group cash flow statements for SBS&L show that the money is accounted for in OEG and applied to the running costs of OEG/CCFC.

The only entity that can trade in players under EFL/FA rules is OEG, and the figures must be shown in the OEG audited financial statements

The financial statements reveal that costs before interest regularly exceed income and the player sales bridge that gap. There is no spare money

“SISU have never taken any money out of CCFC” – INCORRECT

Since 2008 the accounts of the football club (pre and post the administration) show a number of occasions where the loans have decreased in value. This does not mean that SISU Capital Limited has taken funds directly from the CCFC companies but the investors (the original funds, ARVO & SISU Master Fund) must have.

In 2011/12 the loans were repaid by 1.125m (pre administration)

2013/14 & 2014/15 ARVO converted some its loan to preference shares. After the administration the owners transferred the old losses of the previous CCFC companies to OEG before converting them to preference shares totalling £60.9m. This was not new money.

2016/17 part of the loans from SISU Master Fund (£1.03m) received 2016 and 2017were repaid by £112k

“SISU do not put any money in to the club” – INCORRECT

It is not true to say SISU have not put any money in recently. In 2015/16 SISU Master Fund made a loan of £530K and in 2016/17 £500k (part repaid in same year). In those two years the club only balanced the cashflow because of those loans (ie what was spent was balanced by what was received including the loans)

Had SISU not put those sums into the club then Otium/CCFC would not have been able to pay its bills and could have become insolvent

Up until 31/05/2017 ARVO had put £8.65m funds into OEG/CCFC. Of that £2m was prior to OEG becoming OEG/CCFC and £1.5m funded the purchase of the CCFC assets from the administrator.

“SISU are paid large amounts of interest on the loans” – INCORRECT

There are loan agreements with ARVO and SISU Master fund that mean Otium/CCFC is charged interest on the sums outstanding

Over 98% of the interest on loans provided by shareholders or SISU has never been paid out.

The interest charge is legally due but Otium/CCFC has no way of paying those sums, it simply hasn’t had money in the bank to pay it.

The loan interest is not paid or written off but added to the total debt each year

There were relatively small amounts of interest paid over, in 2017 £39k 2016 £25k

Otium/CCFC owed a total of £5.63m interest outstanding as at 31/05/2017

The interest charge cannot be ignored when calculating the OEG/CCFC profit in any year of financial statements “because they are due to the owner”. The loans & interest are fundamental to the ability of the company to keep going and are legally payable

“SISU are paid the administrative expenses shown in the accounts” – INCORRECT

Administrative expenses are a category of expenses and costs that is required by the Companies Act 2006 to be disclosed. It includes depreciation, audit fees, rental costs of land or equipment but it also includes costs like rates, insurance, light & heat, Repairs, registrations, certain wages, director’s remuneration etc. No different to most companies

In 2017 the total of administrative expenses was £1.57m. Of which Depreciation was £140k Audit £27k Rent or lease costs £656k, Directors remuneration £176k. Leaving £570k spent on the other overheads

The administrative expenses are broadly similar to other clubs of similar size that publish a breakdown

“Tim Fisher is not paid by CCFC” – UNKNOWN

There is director’s remuneration disclosed in the 2016 & 2017 financial statements. But no disclosure as to who

During 2016 & 2017 Marc Venus was a director of Otium/CCFC so any remuneration could only relate to him.

Remuneration of £175K it is stated was paid to third parties on behalf of the Directors

“CCFC is self sufficient”- INCORRECT

As shown previously this is not the case because in 2016 and 2017 financial statements a SISU controlled entity has had to put just over £1m in to OEG/CCFC. If it were self sufficient there have been no requirement to do so

OEG/CCFC does rely on the match day, commercial and player sale incomes to operate and survive. However the financial statements to 31/05/2017 disclose this was not enough and loans were required from the owners.

“the auditors sign the accounts off” – CORRECT BUT

The auditors sign off their opinion of the financial statements.

The director signs off the accounts before the auditors can sign

The directors must be satisfied that for a period of at least 12 months from the date of signature that the company is a going concern. That means the company has the ability to trade as a football club (eg a home ground) and can fund it so it can meet its debts as they fall due.

The auditors examine the accounts and make their own independent assessment whether they show true & fair view and a company that is a going concern as described by the director for the 12 months from date of signature. If they do not agree they are required to publish an adverse audit report and to state why.

A written assurance from the owners that they intend to continue to fund or source funds is not a guarantee to do so and is not legally binding

Financial statements are filed with Companies House and the EFL by 28th February each year

INSOLVENCY

“SISU will put us in to administration again” - UNKNOWN

It is only one of several possibilities available. What happens will depend on what suits SISU and its investors best. It is far from a certainty.SISU have a duty to act in the best interests of their investors first and foremost.

The directors must act in the best interest of OEG. But also have a duty to consider the interests of the shareholders

As the part owners and by far the biggest creditor ARVO control would control any insolvency. ARVO is controlled by SISU

You do not need to go in to administration to dissolve or liquidate a company

Administration costs are high and such an action would weaken the control SISU have.

Assets of a distressed company are often sold at under true value

If Wasps became an unpaid creditor of OEG they could petition the courts for administration, but control of the process would be taken over by SISU

There is no evidence that OEG/CCFC are not paying their liabilities as they fall due

There is no evidence that the owners will not continue to support OEG

There is no evidence that OEG is insolvent.

SKY BLUE TRUST

“the Sky Blue Trust want to force the club to go into administration so they can take over” – INCORRECT

There is simply no legal mechanism by which the Trust can do this. It is impossible.

OEG/CCFC going in to administration does not even guarantee that the Trust could be involved in the club going forward or the rescue package.

Insolvency is one of the scenarios that the Trust has made contingency plans for so that they can react promptly to it, as it has for no ownership change, new owners, fans ownership or the worst outcome of no club at all.

The phoenix club scenario is the very last resort to keep a team at all in Coventry and only after all other options have been exhausted and failed.

The first target is a successful CCFC in Coventry

“The Trust just want a seat on the board as an ego trip”

The Trust objectives are set out in their constitution, Details can be found here